Research firm Cowen and Company has upgraded Amazon its rating of Amazon to outperform, saying it expects the e-commerce giant will soon overtake Macy's as the largest domestic apparel retailer.

NEW YORK (TheStreet) -- Research firm Cowen and Company has upgraded its rating of Amazon (AMZN) to outperform, saying it expects the e-commerce giant will overtake Macy's (M) as the largest domestic apparel retailer in the next year or two.

"Amazon is winning in large Retail and Tech markets given long-term investments, per our proprietary data/analysis," Cowen analyst John Blackledge wrote in a research note Monday morning. "We expect Amazon to be the #1 US Apparel retailer by '17, driven by accelerating purchaser growth, and continue to gain traction in other retail verticals."

Blackledge also upgraded his price target for Amazon to $565, up from $435. Amazon shares closed at $483.01 on Friday, and opened higher Monday, trading above $490 just before 10 a.m.

As it stands, Amazon's apparel and accessories business drives about 70% of the company's total revenue, according to Blackledge. Cowen estimates that Amazon's apparel business will grow from $16 billion in gross merchandise volume (GMV) for 2015 to $52 billion GMV in 2020, which would take Amazon from 5% of the total U.S. apparel industry to 14% market share. Were Amazon to follow this track as Cowen expects, it would displace Macy's as the No. 1 U.S. apparel retailer by 2017.

Some of the factors that are contributing to Amazon's wild success in the apparel industry include an expanding selection, improving brand relationships, and superior fulfillment and technology.

In the Cowen Internet Retail Tracker for July, Amazon continued to show high growth overall, but especially in apparel.